For their sake i hope not.
http://money.msn.com/business-news/article.aspx?feed=AP&date=20111021&id=14421404
http://money.msn.com/business-news/article.aspx?feed=AP&date=20111021&id=14421404
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AMR bankruptcy Likely.....so says the Associated Press
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General Lee
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AMR Falls 6.6% After Morningstar Sees Bankruptcy in Future
Q
By Mary Jane Credeur - Oct 21, 2011 2:45 PM MT
AMR has been buffeted this month by intraday stock plunges of as much as 41 percent on speculation that it will seek court protection after annual losses that began in 2008. The company reiterated today that filing for bankruptcy isn’t a “goal or preference” as it seeks to rework union contracts.
“There is no immediate bankruptcy concern,” Micheal Derchinan, analyst at CRT Capital Group LLC, said in a telephone interview. “They have plenty of cash and ways to borrow more, so bankruptcy is not something we have to worry about at the moment.”
AMR ended the third quarter with $4.3 billion in unrestricted cash, and could do a forward sale of frequent-flier miles or borrow against planes and spare parts next year when those assets are freed up, said Derchin, who is based in Stamford, Connecticut. He rates AMR as “fairly valued.”
Shares, Credit Swaps
Today’s decline for AMR was the worst in the Bloomberg U.S. Airlines Index, which dropped 1.2 percent as seven carriers fell. AMR has plunged 65 percent this year.
Investors’ perception of AMR’s creditworthiness improved today, as contracts protecting against a default for five years eased 1.87 percentage points to 56.1 percent upfront, according to data provider CMA. That’s in addition to 5 percent a year, meaning it would cost $5.61 million initially and $500,000 annually to protect $10 million of AMR’s debt.
Management at American is working to improve financial results and reach new labor contracts with pilots, flight attendants and other employees, said Sean Collins, a spokesman.
“Bankruptcy is not our goal or preference,” Collins said in a telephone interview. AMR and the APA recessed contract talks late yesterday and plan to resume bargaining on Oct. 24. Pilot unions are considered a bellwether in industry labor negotiations. Unlike peers including United and Delta, AMR didn’t reorganize under Chapter 11 bankruptcy court protection in the past decade, so its costs are higher, Collins said.
Morningstar’s Alukos, who is based in Chicago, said in his report that staying out of bankruptcy left AMR “unable to cleanse its excessive cost structure,” and that the company won’t be able to pull off a turnaround.
CRT Capital’s Derchin said AMR’s situation is “tough, but fixable.”
“Management’s focus is not on bankruptcy,” he said in the interview. “They would view that as a failure.”
To contact the reporter on this story: Mary Jane Credeur in Atlanta
Bye Bye---General Lee
Q
By Mary Jane Credeur - Oct 21, 2011 2:45 PM MT
- American Airlines fell 6.6 percent, the fourth decline in six trading sessions, after a Morningstar analyst said he concluded that the company “will succumb to bankruptcy.”
AMR has been buffeted this month by intraday stock plunges of as much as 41 percent on speculation that it will seek court protection after annual losses that began in 2008. The company reiterated today that filing for bankruptcy isn’t a “goal or preference” as it seeks to rework union contracts.
“There is no immediate bankruptcy concern,” Micheal Derchinan, analyst at CRT Capital Group LLC, said in a telephone interview. “They have plenty of cash and ways to borrow more, so bankruptcy is not something we have to worry about at the moment.”
AMR ended the third quarter with $4.3 billion in unrestricted cash, and could do a forward sale of frequent-flier miles or borrow against planes and spare parts next year when those assets are freed up, said Derchin, who is based in Stamford, Connecticut. He rates AMR as “fairly valued.”
Shares, Credit Swaps
Today’s decline for AMR was the worst in the Bloomberg U.S. Airlines Index, which dropped 1.2 percent as seven carriers fell. AMR has plunged 65 percent this year.
Investors’ perception of AMR’s creditworthiness improved today, as contracts protecting against a default for five years eased 1.87 percentage points to 56.1 percent upfront, according to data provider CMA. That’s in addition to 5 percent a year, meaning it would cost $5.61 million initially and $500,000 annually to protect $10 million of AMR’s debt.
Management at American is working to improve financial results and reach new labor contracts with pilots, flight attendants and other employees, said Sean Collins, a spokesman.
“Bankruptcy is not our goal or preference,” Collins said in a telephone interview. AMR and the APA recessed contract talks late yesterday and plan to resume bargaining on Oct. 24. Pilot unions are considered a bellwether in industry labor negotiations. Unlike peers including United and Delta, AMR didn’t reorganize under Chapter 11 bankruptcy court protection in the past decade, so its costs are higher, Collins said.
Morningstar’s Alukos, who is based in Chicago, said in his report that staying out of bankruptcy left AMR “unable to cleanse its excessive cost structure,” and that the company won’t be able to pull off a turnaround.
CRT Capital’s Derchin said AMR’s situation is “tough, but fixable.”
“Management’s focus is not on bankruptcy,” he said in the interview. “They would view that as a failure.”
To contact the reporter on this story: Mary Jane Credeur in Atlanta
Bye Bye---General Lee
Flyby1206
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Totally agreed. The point I was trying to make is that AMR is still a long ways from BK. They paid cash for a few of the recent 777-300ERs they ordered. Sticker price on those are about $250mil a piece. I hope APA can come out with a great contract and get all those furloughed guys off the street ASAP.
spacecadet1
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Really? UAL did that not too terribly long ago. In fact, the bond rate was an eye watering 17% and they ain't bankrupt!
Is it dumb? They didn't declare bankruptcy when everyone else did. They appeared to be taking the high road but now wish they had not. They have a very senior workforce that they know will be gone in the next 5 to 10 years. The economy is in bad shape so in their eyes the timing is either now or never. Wipe the slate clean, hope for new pay and work rules before the new blood shows up and be positioned for an economic recovery.
I'm willing to bet that's how management sees it.
I'm willing to bet that's how management sees it.
Sacha made a good point. American is screwed because of bankruptcy laws allowing their competitors to renege on their contracts for lower rates. Because American was the only ones that did not, their competitors became "low cost carriers" and undercut them.
In reality, their business model worked, and worked fine in a normal business environment, but when the competition is able to reduce their costs through bankruptcy whenever they feel like it...bankruptcy becomes the only viable way to continue operating.
In a better world, the crappy airlines that go bankrupt multiple times would simply cease to exist, allowing the entire industry to enjoy higher profits, providing greater job security and higher wages. In this case, the bankrupt airlines have succeeded in destroying a perfectly viable airline that chose not to seek bankruptcy protection. The complete opposite of a free market.
Sad.
In reality, their business model worked, and worked fine in a normal business environment, but when the competition is able to reduce their costs through bankruptcy whenever they feel like it...bankruptcy becomes the only viable way to continue operating.
In a better world, the crappy airlines that go bankrupt multiple times would simply cease to exist, allowing the entire industry to enjoy higher profits, providing greater job security and higher wages. In this case, the bankrupt airlines have succeeded in destroying a perfectly viable airline that chose not to seek bankruptcy protection. The complete opposite of a free market.
Sad.
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No kidding. I was in ord the other day and behind each gate was a big screen tha said "The newest jet fleet in the industry.". Moving closer the tiny fine print said "coming soon with the largest aircraft order in history.". Lol...
Data
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I thought the same thing when United did that a year or two back, look where they are!
High road in their eyes? Or yours or mine? Two completely different things...
Would those bonuses have been of the same breadth and scale if they had gone into Bankruptcy? I think not....
spacecadet1
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The poor performance here has nothing to do with labor costs. AA has been competing with these low labor costs for a long long time now.
There were actually making good money back in 2007, and that is with the labor difference they still posses.
What has changed since then?
1) DL/NWA Merged
2) CAL/UA Merged
3) SWA/AT Merged
4) Everyone else dumped their fuel guzzlers- AA did not
5) AA Management has failed to adapt.
Labor is only one variable in the piece of the pie. When you read their rhetoric, you'd think that AA is paying 3 times the labor cost of its competitors. If you look at the facts at the MIT airline data project website, you'll see that the AA cost for its pilot is at best 10% higher than other legacies and "even steven" when compared with SWA. You don't get the productivity out of AA guys like you could, but AA could get that if they gave APA a contract.
Look at the #1 cost of all the airlines, GAS.
If you look at 1 figure, gas of AAs SNB fleet, the data shows that AAs fleet burns an average of 37% more gas per hour than CAL, which has the most efficient SNB fleet (961 gal vs 697 gal per block hr).
If you compare this with Delta, they are only 6% less efficient.
Get rid of the gas guzzling airplanes.
Labor isn't the issue, management of AA is.
There were actually making good money back in 2007, and that is with the labor difference they still posses.
What has changed since then?
1) DL/NWA Merged
2) CAL/UA Merged
3) SWA/AT Merged
4) Everyone else dumped their fuel guzzlers- AA did not
5) AA Management has failed to adapt.
Labor is only one variable in the piece of the pie. When you read their rhetoric, you'd think that AA is paying 3 times the labor cost of its competitors. If you look at the facts at the MIT airline data project website, you'll see that the AA cost for its pilot is at best 10% higher than other legacies and "even steven" when compared with SWA. You don't get the productivity out of AA guys like you could, but AA could get that if they gave APA a contract.
Look at the #1 cost of all the airlines, GAS.
If you look at 1 figure, gas of AAs SNB fleet, the data shows that AAs fleet burns an average of 37% more gas per hour than CAL, which has the most efficient SNB fleet (961 gal vs 697 gal per block hr).
If you compare this with Delta, they are only 6% less efficient.
Get rid of the gas guzzling airplanes.
Labor isn't the issue, management of AA is.
Capt.Underpants
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You can operate a gas guzzling fleet if you own the airplanes versus a competitor making payments on a new fleet. But if you've traded your old dogs for a high interest credit line you are hosed. Even more so when fuel prices climb.
AA may or may not "own" those planes, however with an old fleet, they have higher gas bills, more maintenance costs, more down time, higher cost for replacement parts.
Didn't AA have to ground its whole MD-80 fleet about a year ago because some FAA maintenance issue?
I'd be more than willing to bet those old MD-80s are costing them much more than those with newer fleets, otherwise, why did CAL park all the -300s, and UA park all its 737 fleet? Why has AA recently placed an order for over 500 new aircraft if those old aircraft are worth it? DL has been parking stuff too, just at a much slower rate.
It's easier to make capital improvements when you have the employees pay for it.
General Lee
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I remember some execs getting bonuses for "emerging from a successful BK." Of course the big winners are BK lawyers. One thing they are open to in a BK is a hostile takeover. USAir tried to go after Delta in BK, but the other creditors didn't like it. You just never know.
Bye Bye---General Lee
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The Prussian
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You can almost guarantee USAir will make a bid at AA if bankruptcy happens. Once the bad debt is gone, USAir will buy them and take the American name.
Anyone else attempting to buy it would be difficult due to overlap, unless they sell the pieces.
That rich guy from Omaha?
Poahi
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Do you mean the guy who disputes his taxes or the one who thinks he should pay more of them?
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